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Question - Your company has received an order for 60 units of a product. The labor cost to produce the item is $22 per hour. The setup cost for the item is $1200 and material costs are $80 per unit. The learning rate is 80 percent. Overhead costs are charged at a rate of 60 percent of material cost.
a. Determine the average production unit cost for the 60 units if the first unit takes 12 hours.
b. The item is sold for $219.99 per unit. Should your company take this order? Why or why not?
c. Determine the minimum number of units that need to be made before it makes sense to accept the order.
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